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Khaleeji Capital, Not Just about the Oil

By: 
Konstantin Kilibarda
Date Published: 
January 11, 2012

A Review of CAPITALISM AND CLASS IN THE GULF ARAB STATES
by Adam Hanieh

Palgrave Macmillan, 2011

Adam Hanieh’s Capitalism and Class in the Gulf Arab States (2011) is an indispensable text for anyone interested in the Middle East. This groundbreaking study traces the historical trajectory of capital, class and state formation in the Gulf and its role in shaping global capitalism since WWII. According to Hanieh, the Gulf Cooperation Council (GCC) – established in 1981 by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) – effectively institutionalizes the preference of Gulf elites for neoliberal strategies of internationalization and financialization. He coins the term “Khaleeji Capital”, which is derived from khaleej, meaning gulf, "but goes beyond a geographic meaning to convey a common pan-Gulf Arab identity that sets the people of the region apart from the rest of the Middle East.”
 
The uniqueness of Hanieh’s approach lies in his agile application of Marxist theory to analyze these developments. Noteworthy in this regard is his use of Marx’s three circuits of capital to trace Khaleeji Capital’s movements. In doing so, he highlights the GCC’s centrality in reproducing global capitalism through: (1) its pivotal role in the hydrocarbon industry (as the largest exporter of both upstream oil and gas and downstream petrochemicals, i.e. the circuit of productive capital); (2) its relevance to global trade and retail networks (as a rapidly growing market, a flexible node in the entrepot trade between Europe and Asia and as an intermediary between global and regional markets, i.e. the circuit of commodity capital); and (3) its centrality to global finance (as an important source of liquidity, initially through petrodollar surpluses and increasingly through local investment vehicles like Sovereign Wealth Funds and GCC-based private equity firms, banks and stock exchanges, i.e. the circuit of money capital).
 
Hanieh’s mapping of these circuits is executed with painstaking attention to detail and incisive precision, providing readers with an unprecedented snapshot into the GCC’s development. The book contains thirty pages of appendices and tables that together reveal the interlocking networks of cross-ownership in the Gulf, tracing the spatial configuration of the GCC’s productive, commodity and financial circuits as well as investment patterns outside the region. Although the appendices and tables help the reader grasp the nature of Khaleeji Capital, the book is not reducible to this important mapping exercise. Instead, its strength lies in Hanieh’s ability to move beyond facts and figures to highlight the exploitative human geography undergirding the GCC’s wealth and its far-reaching political implications.

Migrant labor

To this end, Hanieh repeatedly draws attention to a Gulf state development strategy based on the exploitation of migrant labor. The GCC’s infamously repressive labor regimes - increasingly organized around a migrant labor force drawn from South and Southeast Asia, systematically denied citizenship and subject to almost immediate deportation - thus become a strategic means for Khaleeji Capital to ensure the “enduring stability of the system as well as enabling the superexploitation of workers drawn from the peripheries surrounding the GCC.”

As an illustration of how this system operates, Hanieh details how the worst effects of the 2007-2008 financial crisis were displaced onto labor-sending regions in South and Southeast Asia through mass layoffs and the deportation of migrant workers. Such actions, what one Saudi National Commercial Bank analyst callously called the “positive externality of labor market flexibility”, have become a crucial mechanism for the GCC to suppress potential labor unrest.
 
Hanieh’s analysis also draws attention to the vital political role that elites within the once sizeable refugee diasporas of the Gulf – consisting of Palestinians, Lebanese and more recently Iraqi refugees – have exercised historically both within the political economy of the Gulf itself, but more importantly in their home countries.
 
Along these lines, Hanieh highlights Khaleeji Capital’s ability to shape political developments outside its borders. Using Lebanon and the occupied Palestinian territories as case studies, he notes the GCC’s ability to shore-up of neoliberal elites through the thick sinews linking Gulf capital with Saad Hariri’s Future Movement in Lebanon and Mahmoud Abbas’ Palestinian Authority (PA), effectively subsuming both as a “subcomponent of Khaleeji Capital.”  However, he stops short of examining the equally important role labor migrants in the Gulf have played in diffusing Salafi and Wahhabi ideology back into South Asia and North Africa in recent decades.
 
Arab Spring

Hanieh’s insights into the political dimensions of Khaleeji Capital’s expansion are particularly relevant at the moment, as the revolutionary wave of the Arab Spring meets the counter-revolutionary activism of the GCC. The past year has seen Saudi intervention into neighboring states (Bahrain, Yemen); the projection of Qatari military power outside the GCC (Libya); the tentative expansion of the GCC to support non-Gulf Arab monarchies similarly threatened by unrest (Jordan, Morocco); the GCC’s financing of Islamist political parties (Tunisia, Egypt); the on-going militarization of the region (increasing UK and US arms-sales); as well as an assertive diplomatic stance towards the GCC’s remaining regional rivals (Syria, Iran). These interventions underscore the perceptiveness of Hanieh’s claim that there exists “a great need to squarely locate the broader development of the Middle East within the internationalization tendencies of the Gulf.”

Finally, Hanieh persuasively argues that the same elements that made the GCC what it is today are likely to persist for the foreseeable future (i.e. its role as a vital source of hydrocarbons and petrochemicals for the world economy, a hub in global trading networks and as a source of financial liquidity). Accordingly, he shows how the current global financial crisis has only served to deepen the strategic orientation of Khaleeji Capital towards further regional integration. Hanieh also notes that this trajectory is not preordained or irreversible. He is attentive to the possibility that sharpening regional tensions and inter-capitalist rivalries may engender a reorientation of the Gulf towards new geopolitical alignments (for instance towards East Asia).
 
Nevertheless, the strong interests binding Khaleeji Capital to the existing “GCC-US-Asia triad” will likely prevent such a reorientation for the foreseeable future, not the least of which is the “continuing tight military relationships between the United States and the GCC states…[which] make it difficult to conceive of a fundamental shift in the GCC’s allegiances.” Instead, Hanieh predicts, “GCC capital will be increasingly drawn into a role of ‘superintending’ the structure of global capitalism alongside the United States and other leading capitalist states (including China).”
 
This is a role that the GCC has ably performed in response to recent revolutionary upheavals. Capitalism and Class in the Gulf Arab States thus provides an essential template for reading current political developments and projecting future trends in region. Hanieh’s trenchant analysis and attention to detail make this book essential reading for anyone interested in understanding the serious challenges that confront any revolutionary project in the Middle East. More importantly, it fills a critical gap in our understanding of early 21st century global capitalism. When taken together, all of these factors give this book the quality of an urgent intervention in the field of political economy.

Konstantin Kilibarda is a PhD candidate at York University.